Recovery program approved for city

SHAMOKIN - The city's case that it is a financially distressed municipality was convincing enough to make it the 21st active member of the state's Act 47 recovery program.

A private consulting firm must be under contract by mid-July to become Shamokin's Act 47 coordinator, after which it will have 90 days to develop and propose a long-term financial recovery plan.

The city's application for a $1,163,500 interest-free loan remains pending. It's needed by mid-August - that's when City Hall is predicted to run out of money. The loan, to be paid over 10 years, would be used to cover more than $811,000 in bills owed from 2013 and also carry the city through the end of this year.

City clerk Robert M. Slaby has spoken with several of the vendors who have outstanding invoices with the city. In some cases, Shamokin has had to negotiate a purchase from a vendor still owed payment from 2013. None he'd spoken with outright demanded immediate payment, Slaby said.

"(Some) were never aware that the city was having financial troubles; they just assumed that nobody wanted to talk, nobody wanted to pay the bills," Slaby said Monday.

Apart from the loan, Shamokin will receive preference for state grant programs and will receive consultations from financial, legal and operations experts.

Shamokin's need for assistance is reflected in its high unemployment rate, a tax base that is continually eroding, a systemic deficit year to year, and decreases in revenue.

Four criteria

C. Alan Walker, secretary of the Department of Community and Economic Development (DCED), signed an order June 16 accepting Shamokin into Act 47.

Walker agreed with the department's assessment that it met four criteria to be accepted: at least three consecutive budget deficits, spending exceeds revenue for three years straight, a deficit equal to at least 5 percent of municipal revenue for consecutive years and failure to meet its annual pension payment.

A municipality must only meet one of 11 specific criteria to be considered.

"I recognize that Shamokin is facing several hurdles and quick action is necessary to prevent the city's financial situation from getting worse," Walker said. "Shamokin needs more than a short-term or week-by-week fix from its creditors and obligations; it needs a comprehensive recovery plan that will lay the groundwork for long-term financial solvency."

The order comes on the heels of a public hearing held June 4 at City Hall at which department personnel heard from city officials, Shamokin's state-appointed fiscal adviser, Financial Solutions, a division of Stevens and Lee consulting firm, as well as members of DCED's Governor's Center for Local Government Services.

Financial Solutions and Government Services personnel have worked closely with city officials since last fall, including in the creation of an Early Intervention Plan and, ultimately, the May 12 application for Act 47. The relationship could continue as Financial Solutions has also applied to become Shamokin's Act 47 coordinator.

Walker stressed that while DCED and the appointed coordinator will provide oversight, elected city officials have ultimate responsibility for the city's policies and day-to-day management of city affairs.

Population in middle

Including Shamokin, DCED has now declared 28 municipalities as distressed since 1987.

Seven municipalities have successfully emerged from the program, including Shenandoah. The average time spent by each in the program was nearly 10 years. The shortest was three years. The longest was 21 years, belonging to the most recent municipality to exit - Millbourne Borough in Delaware County. Its Act 47 status was rescinded on March 11, the first since 2007. West Hazleton, Luzerne County, and Westfall Township, Pike County, are expected to do the same this year, a DCED official said previously. However, nine other municipalities have remained in the program for more than two decades.

Of the 21 current enrollees, Shamokin's population puts it right in the middle: 11 have lesser populations (six of which are comparable to Shamokin's 7,374) and nine have greater populations. The smallest Act 47 municipality is the borough of Franklin, Cambria County, with just 323 residents. Pittsburgh is the largest with a population of 305,704. The cities of Reading and Scranton are each also enrolled.

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